Pat Bazley

Thursday, 24 February 2005 06:37

Plastic burns paper

In 2003, the number of electronic payment transactions in the United States was, for the first time, greater than the number of checks written, according to the Federal Reserve Board.

That year, people used credit cards, debit cards and automated clearinghouse transactions to complete 44.5 billion transactions totaling $27.4 trillion. During the same period, they wrote 36.7 billion checks totaling $39.3 trillion.

Checks may not be on the endangered species list yet, but there is no reason to believe the trend toward plastic will dwindle. On the contrary, there is every reason to suppose it will continue to pick up speed as baby boomers grow into their relatively affluent and mobile retirement years.

That means businesses -- including small businesses -- must accept credit and debit card payments if they are to remain competitive. It also means that businesses must be smart about finding the best possible provider for credit/debit card services, whether they are just starting to accept such payments or have been doing so for years.

Cost is the biggest deterrent for businesses in starting or expanding their credit/debit card services. However, costs can, to some extent, be controlled.

Typically, credit or debit card transactions cost businesses anywhere from 2 percent to 4 percent of each sale. The bulk of the expense -- as much as 66 percent -- is dictated by MasterCard and VISA associations. Businesses can reduce these expenses by working with their service providers to be sure they are following the correct procedures, such as verifying billing addresses or asking for the code on the back of the card when taking orders by phone or Internet.

Not only do such precautions help minimize costs, they are safeguards against the other major concern of business owners -- that they will become entangled in fraudulent transactions for which they ultimately will be held liable. Some basic precautions, including verifying identification during terminal-swipe transactions, are the first line of defense, but shrewd selection of a merchant services provider is additional protection.

No business can overlook the importance of doing business on the Internet, and a good service provider can make recommendations to keep businesses safe in that high-risk world. For example, a provider that takes the time to learn about each company's way of doing business can make suggestions that will minimize credit/debit card transaction fees while maximizing customer accessibility.

Additionally, a good provider will be sure businesses are protecting cardholder data. That includes being sure full account numbers are not printed on receipts and that data is stored where it can't be hacked into from the outside -- meaning it is not stored on computer terminals in the store or office.

Finally, a good provider will have an excellent service reputation and will fully disclose all monthly and transaction fees. Businesses must understand that the lowest presumed cost is not always the lowest pricing and should look for hidden fees. A good provider also will offer round-the-clock technical support that businesses can rely on for help when a problem arises.

With the use of checks on the decline, businesses are required to offer customers a full range of the best payment options, including credit/debit cards. Credit and debit card transaction capability can increase sales and reduce receivables. Businesses should take the time to find the right provider to be sure those sales come with more pleasure than pain.

The right merchants' services provider can help even the most experienced business negotiate the often-confusing byways of electronic transactions, but it's incumbent on businesses to be as diligent in managing credit card fees as they are in managing any other finances. Finding the right provider may require some legwork, but it can save serious headaches in the long run.

Pat Bazley is vice president of merchant banking solutions at MB Financial Bank. Reach her at (847) 653-1980 or